Microphone Maker Knowles Faces Legal Challenge In China

Knowles, a supplier of microphones to Apple and Samsung Electronics, said its lawyers were shut out of court proceedings in an intellectual property suit filed by a Chinese rival, highlighting the uncertainties foreign companies can face in China’s legal system.

Itasca, Ill.-based Knowles is the world’s largest supplier of micro-electrical-mechanical systems (MEMS) microphones, which are widely used in smartphones. The company has a factory in Suzhou, near Shanghai. Since 2012, Knowles has faced stronger competition from business with Apple from Chinese competitors Goertek and AAC Technology Holdings. Knowles and Goertek have been locked in legal battles in the U.S. and China since June, with each accusing the other of patent infringements.

Weifang, China-based Goertek, in which Chinese billionaire Jiang Bin owns a 20.5% stake, was listed in Apple’s 2013 supplier list, although it was not in its list two years earlier. Morgan Stanley predicted last month that Goertek will supply 40%-50% of the microphones in Apple’s next iPhone.

Knowles said Wednesday the Weifang Intermediate People’s Court in China denied its lawyers access to the courthouse as the trial against Goertek proceeded on March 31.

The Weifang Intermediate People’s Court and Goertek did not immediately respond to requests for comment. An Apple representative wasn’t immediately reachable.

Intellectual property has long been a major issue for foreign companies that operate in China. Last month, China’s premier Li Keqiang said he would put more emphasis on intellectual property rights and reinforce penalties for infringement. Chinese courts have been accused in the past of favoring local companies in litigation against foreign competitors.

Lawyers in China said the situation Knowles is alleging is unusual and raises questions of whether other companies could face such a situation.

Dominic Edmondson, an intellectual property consultant with Rouse Beijing, said that if Knowles loses the case, it would have two further chances to appeal, with the Intermediate People’s Court and the Shandong Provincial High Court.

“At that point, there would be a far lower chance of local protectionism,” he said.

Last month, U.S. industrial manufacturing firm Dover completed the spin-off of its microphone unit, Knowles. Goertek’s suit against Knowles in its home province of Shandong came in response to Knowles suing Goertek for patent infringement in the U.S. in June.

Lilian Lin contributed to this article.

Correction & Amplification: An earlier version of this article misstated that Knowles lost market share of Apple’s business in 2013.